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Analysis: Markets React to Shutdown

10/1/2013 11:25AM

Markets are currently up despite the government shutdown in Washington, however, trouble could be brewing if the stalemate continues. Daniel Alpert, Westwood Capital managing partner, joins MoneyBeat with a look at the long-term impact on the economy. Photo: AP.

This transcript has been automatically generated and may not be 100% accurate.

... I in in in mm mm ... governments fall ... because the irrationality of what's going on in the oversight council ... Democrats voted again ... and again ... to reject ... reasonable ... legislation ... every piece of legislation the House over would've kept the government from shutting down every single one of them ... each one represented more of a compromise ... them the last ... Senate majority leader Harry Reid and Senate minority leader Mitch McConnell ... both spoke out this morning as talks continue on the budget stalemate in Washington welcome to MoneyBeat I'm Paul vignette is been just over ten half hours since the government shutdown ... after Congress failed to meet the midnight deadline pass a budget more gets ... interesting Lee enough are currently up despite the government shutdown Washington ... however ... trouble could be brewing at the stalemate continues ... joining us to explain everything going on this morning Daniel Alpert ... managing partner at Westwood capital ... although the new book The Egypt oversupply ... overcoming the greatest challenge to the global economy being of thanks for coming in this were to be here ... I'm you look at the market reaction to this yes markets are down pre sharply yesterday in the quarter ... but this morning ... and really no reaction to the actual shutdown itself ... how much does the market need to create tension what's going on Washington by arguably the market did price this and I mean based on yesterday's activity in some while pulling the last two weeks but the fact the matter is is that ... nothing really happens rather than a bunch of people not getting paid which is going to pass through if it's for tracked into GDP statistics fourth-quarter ... who make them very depressed ... but having said that ... the beginning understands that that's that that that's the play ... what's going to happen going forward he is ... that the big political question of of the debt ceiling and that's really going to stop Bell ... every discovered ... by my middle of the monthly milligram I'd you know ... how much of this bring me right now to look a lot of this political theater ... I just for the market has opened its top becoming political theater and at what point does it become something we really need to be concerned well obviously we hit the debt ceiling are a lot of people confusing the debt ceiling with default it's not a default it's as though your ... your paycheck goes down you can still pay the interest on a credit card to scan your laurels are easy ... prey you can afford groceries for it so other cuts need to be made in so that would cut federal spending even further I mean obviously you click to play that out eventually campaign did that but ... um that would never happen ... what this will do that when this is the real All chips on the table kind of that by the Republicans in two ways one is of course ... if God forbid Obamacare ... is successful God forbid the Republican whatever I ... um in a year from now when they hit the midterms they're gone yet right ... but the second thing is ... that really when you push this thing towards the debt ceiling issue ... you're going up ultimately confront the fact that ... they did that they will not be able to continue ... and assume that the president will not exercises executive before you think it's very clear ... he's been ... really keeping that in his back pocket for very very ones at the end of the fourteenth amendment ultimately the president can do what's best for the nation ... and certainly he can order ... the debt ceiling to be ignored ... and and and and things to go on as they as they should ... I've that will ultimately give him a lawsuit will be in from the Supreme Court it some point ... but really it's a shoot first ask questions later and that he and ultimately you do that I believe ... aam and that of course takes the whole debt ceiling issue ... chopped it into the court where Michael wait forever ... well I mean ultimately right ultimately the court will likely rule I believe ... that you can't ... budget ... expenses and then refuse to pay the ... rent not know the markets looking at this order through the prism of history so to the prism of what this means for Fed policy ... but to the historical aspect of this this and all that pesky shutdowns are very temporary ... on ... but this moment time is different from some of those too well because we have we first saw ... him in the nineties we have a government shutdown of the economy was booming was really into an even more moving ... back ... in nineteen ninety six ... so now we're in a situation we have very very tenuous recovery ... in fact we've been pursuing but only available policy because we have no governance in Congress ... the only villain policy being monetary which has really pushed the string at this point we're not getting a lot of bang for the buck ... on for the government for the monastery of purchases prompted the easing ... the Fed felt the need to continue to do it that should send a really strong signal that the Fed is concerned about this recovery ... answer consequently when you when you play that out ... you've got you've got a look at this ... the huge amount of money that's going to be sucked out of the economy ... even temper often ... in terms of payment obviously when people back to work to get their back pay all the stuff ... but this will ... hurt some business activity obviously velocity of money is so slow to appear that anything that slows that stream ... is is that the economy the long run ... course ... globally this is a this is a nightmare I mean we are we we are is a say in my book were fighting the last war the fall of this notion that somehow the private sector's going to rise up create lots of good well paying jobs ... when we've got an enormous oversupply of Libor ... of productive capacity in capital ... it's just not gonna happen and so we need other we need other policies in force even Republicans are not receptive to fight the awkward age of oversupply and that means for thank you for it